Obama Can Eat Steak in Belvidere as Chrysler Brings Jobs

Chrysler Group LLC employees work on a 2013 Dodge Dart as it moves along the production line at the company's assembly plant in Belvidere, Illinois, U.S. Photographer: Daniel Acker/Bloomberg

July 13 (Bloomberg) -- Chrysler Group LLC’s factory in
Belvidere, Illinois, is bustling, shipping about 300 Dodge Darts
a day. A mile east on U.S. Route 20, a new restaurant has added
an assembly line of its own: one that makes steak sandwiches.

Business is looking up at Fiesta Market, a grocery that had
struggled during the recession, said owner Mike Bolis. In May,
he added an adjoining restaurant, Fiesta Tortillas, and he has
hired 15 more people to make and sell fast-food items such as
Mike’s Famous Steak Sandwich, a seven-ounce rib-eye served on a
bun with lettuce, tomatoes and grilled onions.

“Hopefully, the people from Chrysler will come visit us
more often,” Bolis said in a telephone interview. “I do see
more people from the plant coming in. I do have my regulars.”
The restaurant also makes daily deliveries to the factory.

Chrysler, under the control of Italy’s Fiat SpA, has surged
back to health since its 2009 bankruptcy and government bailout,
and it’s bringing Belvidere along for the ride. The factory
completes hiring for a third crew this month, which will bring
it to 4,500 workers cranking out vehicles 120 hours a week. It
employed as few as 200 people three years ago.

Chrysler’s investment will bring total employment by the
automaker and its suppliers in the region to 6,000, according to
the area’s economic development group.

President Barack Obama touts his administration’s rescue of
the industry and factory towns such as Belvidere as a crowning
achievement of his first term. He has used it to differentiate
himself from Republican candidate Mitt Romney, who opposed
government financing of the restructuring and criticized it as
“crony capitalism” to help union allies.

‘Extraordinary Measures’

“As much as people may have disdain for some of these
bailouts in theory, the reality was the situation required
extraordinary measures,” said Diane Swonk, chief economist of
Mesirow Financial Inc. in Chicago, about 70 miles southeast of
Belvidere. “It was the lesser of two evils, and it is now
giving us some support for an economy that is still very
damaged,” she said in a phone interview.

Belvidere and other communities tied to the auto industry
are bucking a national trend of slowing job growth. Employment
in the motor vehicles and parts manufacturing sector has
increased by 25 percent, or 155,400 jobs, from the industry’s
lowest point in July 2009, when General Motors Co. emerged from
bankruptcy protection, according to the Bureau of Labor
Statistics.

Shortened summer shutdowns at auto plants helped reduce the
number of applications for jobless benefits in the week ended
July 7, the U.S. Labor Department said yesterday.

National Picture

The national jobless rate has exceeded 8 percent since
February 2009, the longest stretch since monthly records began
in 1948. Private payrolls, which exclude government agencies,
increased by 84,000 workers in June, the weakest growth in 10
months, Labor Department figures showed on July 6 in Washington.

Weakness in the broader U.S. labor market is depriving
Obama of progress on voters’ biggest concern four months before
the election. Obama, speaking July 6 at a campaign stop after
employers added fewer jobs than economists estimated, called the
hiring “a step in the right direction” and said the economy
has to grow “even faster.” Romney called the report “another
kick in the gut.”

It’s a different story in Illinois, where the unemployment
rate declined for a ninth consecutive month in May, to 8.6
percent, according to the Bureau of Labor Statistics. The
state’s jobless rate had reached 11.4 percent in January 2010,
the highest since July 1983.

Illinois Progress

The state ranks third in the Bloomberg Economic Evaluation
of States from the first quarter of 2010, when auto sales began
recovering from the deepest slump since 1982, through the first
quarter of this year, the most recent data available. Michigan,
home to Chrysler, GM and Ford Motor Co., and energy-rich North
Dakota were the only states to outperform Illinois in that span.

The Belvidere Church of Christ, a couple of miles east of
Chrysler’s factory, is rebuilding its congregation after
dwindling by more than a third in part because of layoffs in the
mid-2000s at the carmaker’s plant, said Daniel Potter, an elder
at the church.

“When the Chrysler plant slows down, Belvidere slows
down,” said Potter, 58, who also works at a nearby repair shop
for heavy-duty vehicles that has seen a rise in business from
the return of semi-truck traffic. “Hopefully, this Dodge Dart
will be a success and just keep going.”

The truth is that Belvidere dodged a bullet, said Frederic
Brereton, the city’s mayor for the past 15 years.

Bullet Dodged

The factory, which also assembles Jeep Compass and Patriot
sport-utility vehicles, wasn’t named in the five-year plan
Chrysler presented to analysts and reporters in November 2009,
and the Dodge Caliber car that was built in Belvidere at the
time was marked as a model that would be discontinued.

Instead, the plant resumed two-shift production. Then,
three days before Chrysler aired a two-minute Super Bowl
commercial with actor and director Clint Eastwood heralding
Detroit’s revival, Chief Executive Officer Sergio Marchionne
joined Illinois Governor Pat Quinn at the Belvidere plant to
announce a $700 million investment and the addition of a third
crew.

“It was as if our city had won the Super Bowl,” Brereton
said in a telephone interview. “We’re just beginning to feel
the impact of the employment. The real estate market is
beginning to benefit from increased rentals from employees that
may be moving to the region.”

Suppliers Hiring

Hiring is spreading beyond the assembly plant. France’s
Faurecia, Germany’s Eberspacher GmbH & Co. and Wilbur Ross’s
International Automotive Components Group are among the
suppliers that will add 550 jobs in the area, said Mark
Williams, executive director of Growth Dimensions, an economic
development group for Belvidere and Boone County.

“Go and look at the parking lots of our industrial
buildings, and we’re full,” Williams said in a telephone
interview. “The optimism is there. We feel the best is yet to
come.”

The Chrysler factory in Belvidere is scheduled to start
operating with three crews of workers on July 23, said George
Welitschinsky, president of United Auto Workers Local 1268,
which represents hourly employees of the plant. The factory will
eventually assemble 1,300 vehicles a day, he said.

“We’re going to be pumping out some vehicles here,” he
said in a telephone interview.

Dealers last month began U.S. sales of the Dart compact,
Chrysler’s first car based on Fiat underpinnings. The Turin,
Italy-based carmaker took control of Chrysler by pledging its
small-car expertise to the combination, seeking scale that would
spread fixed costs such as engineering and design.

Fiat shares have increased 11 percent this year to 3.94
euros.

Failed Combinations

Belvidere has seen its share of failed combinations and
lackluster vehicles.

It started making Dodge Neon compact cars in 1994 and
sought a partnership to make the car with Japan’s Mitsubishi
Motors Corp. that didn’t come to fruition.

The Neon was replaced in late 2005 with the Dodge Caliber.
The Caliber was available with a transmission created by Nissan
Motor Co., a diesel engine supplied by Volkswagen AG and an all-wheel drive system developed with Mitsubishi. It was among the
poor-selling cars that stifled owner Cerberus Capital Management
LP’s efforts to turn around the company after it took over
Chrysler in 2007.

Those cars simply weren’t competitive, said Chuck Eddy,
vice president and principal of a Chrysler dealership in
Austintown, Ohio.

‘Real Energy’

“This car is doing what we tried to do with Daimler and
weren’t able,” Eddy said in a telephone interview last month
while driving a Dart to his store from an event for dealers in
Auburn Hills. “There is a real energy between Chrysler and Fiat
right now, and this car is proof.”

Chrysler is boosting production this year in North America
at the fastest rate among U.S. automakers. The company built
1.23 million cars and trucks in the year’s first half, up 23
percent from a year earlier.

Carmakers are increasing production with U.S. light-vehicle
sales on pace to rise by at least 10 percent for three straight
years for the first time since 1973.

U.S. light-vehicle sales increased 11 percent in 2010 and
10 percent last year after falling to a 27-year low of 10.4
million in 2009, according to researcher Autodata Corp.
Deliveries climbed 15 percent to 7.27 million this year through
June, said Autodata, which is based in Woodcliff Lake, New
Jersey.

Bolis, the Fiesta Market owner, said many of his customers
moved out of the area after they lost their jobs during the
economic downturn. Now, workers who relocated from a shuttered
plant in Fenton, Missouri, a suburb of St. Louis, are
frequenting his store between shifts on the line and weekend
drives home.

“The more traffic you have, the better,” he said.
“They’re working more hours, so they’re excited about that.”